The average American’s 401(K) balance has been revealed, and experts are also sharing the secrets to saving $1 million in retirement savings.
Data recently released by Fidelity Investments showed that the number of 401(K) millionaires hit an all-time high during the first quarter of 2024.
Fidelity revealed that 485,000 people had $1 million or more in their accounts, a 43 percent increase from three months earlier.
The average 401(K) balance was $125,900, which represented a six percent improvement from the previous quarter. The current balance has increased 16 percent compared to the previous year.
Thefinancefam, a popular TikToker who provides financial advice, said you “definitely need” to contribute more than one percent to your 401(K) each year. 401(K) millionaires have an average contribution rate of 17 percent
Data recently released by Fidelity Investments showed that the number of 401(K) millionaires hit an all-time high during the first quarter of 2024. Fidelity revealed that 485,000 people held $1 million or more in their accounts, a 43 percent increase from three months before
Still, only about 2 percent of people with accounts enjoy ‘401(K) millionaire’ status.
Experts have learned lessons from the success of this small group and distilled their wisdom into a series of steps.
First, 401(K) millionaires are not impulsive investors. They are patient and understand that growing their portfolio is a long-term endeavor.
On average, 401(K) millionaires invest in their plans for 26 years with an average balance of $1.58 million. As your salary increases, it is essential to include as much as possible in your plan.
Another key to their success is that 401(K) millionaires have an average contribution rate of 17 percent.
A combination of favorable market conditions and record-level contributions drove average account balances to their highest amounts since the fourth quarter of 2021, according to Fidelity.
On average, 401(K) millionaires invest in their plans for 26 years with an average balance of $1. 58 million
During the last quarter, the average total 401(K) savings jumped to 14.2 percent, a result of high contributions from employees and employers.
Thefinancefam, a popular TikToker who provides financial advice, agreed that it was important to contribute a large amount of his earnings.
While a one per cent contribution is “excellent”, thefinancefam said it is “not really taking a completely aggressive approach to retirement investing”.
“You definitely need to contribute more than one percent each year,” he continued.
401(K) millionaires are also quick to take advantage of company matching plans. According to Fidelity, 81 percent of workers with a 401(K) or 403b benefited from an employer match last year.
These contributions arose from a company matching plan or profit-sharing system.
The most favored type of match is a dollar-for-dollar match for the initial three percent, which then converts to 50 cents on the dollar for the next two percent.
To become a member of the 401(K) millionaire club, you must also demonstrate a high degree of equanimity.
401(K) millionaires aren’t scared by market volatility. Instead, they view bear markets as periods during which they can buy stocks and securities at cheaper prices.
Perhaps the most indispensable step of all, however, is the hardest to follow: 401(K) millionaires don’t touch the money in their retirement accounts.
If you want to increase your balance, it is imperative that you stay strong in the face of temptation.
When you’re struggling financially, it’s easy to turn to your retirement account for help.
If you’re under 59½, you’ll be charged a 10 percent withdrawal fee by doing so, which can hurt your savings.
By weathering the storm, 401(K) millionaires leave their money intact, allowing it to grow.
Caroline Eby told DailyMail.com that she is on the verge of becoming a millionaire with her 401(K) plan, even though she has never earned more than $80,000 in her life.
The finance worker, from Washington DC, said: ‘I started saving at age 25, when I was earning $22,000 a year in manufacturing.
Caroline Eby told DailyMail.com that she’s on the verge of becoming a millionaire with her 401(K) plan, even though she’s never earned more than $80,000 in her life.
‘Every year, I increased my contribution by 2 per cent if I could afford it. I maximized my contribution to around 12 per cent.’
And he added: ‘I have never been married and I have always fully supported myself. I am very happy and proud of myself for the sacrifices I made 30 years ago.
Eby had $990,000 in his account two years ago, but then lost $100,000, something he attributed to the overall economy. Now, his bill is “on the way to going back up,” she said.
“As everyone told me, the race is won slowly and steadily.”